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Is the Blockchain Really the Next Big Thing?

Ajay Sunder, VP, Frost & Sullivan

Ajay Sunder, VP, Frost & Sullivan

Blockchain has been talked a lot about in the recent past. Technology companies and financial services firms globally have been experimenting with Blockchains. Interestingly, companies outside financial services and technology are experimenting new models with Blockchains. The technology is still at its nascent stage but has the potential to transform existing business models.

So, What are the Implications for Blockchains on Technology Companies?

• Infrastructure for Alternate Payments – Blockchains will be an enabler for alternate payment models (e.g Crypto currencies). Many other cryptocurrencies are exploring Blockchain as the decentralized ledger model works well for effective transaction recording and maintenance purpose. Blockchain helps in creating a transparent mechanism where the transactions can be seen and mined by the entities in the ecosystem thus creating a more efficient transaction architecture. This architecture can be extended beyond Crypto currencies. The decentralised ledger means that when someone wants to transfer funds to another individual, the sender only needs to have a connection with one node anywhere in the world to verify their account balance. The decentralisation of the ledger means nodes compete to verify and record transactions faster and at the lowest price. We are seeing new use cases for Blockchain as an enabler for other platforms like Crowdfunding etc.

• Storage and Server Infrastructure –The distributed ledger architecture enables new use cases for Blockchain. As the Blockchain expands (wrt Transactions/ geographies) this will mean adding more ledgers to the architecture. The traditional IT services companies can explore the growth in Storage as well as infrastructure services leading to more increased usage in Data centre ( Co-location services ) and Managed services. Beyond this, other Managed services can be developed for the Financial/other institutions involved in the Blockchain implementation.

• Enabler for Edge Computing – The IT world has seen 2 fundamental shifts in the past few decades. First was the move from main frame to client server which enabled large Databases and Computing power to be located centrally.

The last decade has seen the second shift which is the move to cloud. As devices start getting more intelligent, more and more functionalities will be moved to devices which will be technically on the edge of the network. Thus, more functionalities and processing will be expected from these devices. These devices can be traditional computing devices, new age smartphones, or other intelligent devices in the network (connected and enabled through sensors and with computational abilities), Blockchain can provide the pivot for the transition to Edge Computing. The architecture makes it easier for the inclusion of edge devices and these can be low touch low capability devices.

“Blockchain can provide the pivot for the transition to Edge Computing. The architecture makes it easier for the inclusion of edge devices and these can be low touch low capability devices”

Blockchain as an Enabler for IoT - Key Concerns / Challenges for IoT has been at Multiple Levels:

a.) Authentication – Ensuring the devices are authorized/authenticated to perform the actions they request to perform in the architecture

b.) Transparency – There is transparency in the architecture and awareness about the other elements in the network

c.) Interaction Mechanisms – The interaction messages/ mechanisms are clear and unambiguous.

Blockchain architecture is well suited for this use case. The authentication mechanism can be transparent so that all nodes are aware of the transaction involved. There can be a clear set of mechanisms so that all nodes (IoT devices in an IoT architecture) can play a part in the transactions involved. So the whole architecture can be more secure and transparent wherein each IoT node is aware of other nodes and also of the transactions in the ecosystem.

The Hidden Elephant in the Room?

So, the potential is great and the players in the ecosystem see the benefit. Then what stops the adoption and why have we not seen Blockchain success as may have been expected.

2 of the Key Concern are Security and Standardization

Blockchain architecture seems much more secure and robust . The ledger mechanism ensures all transactions are recorded, thus effectively ensuring no tweaking/hacking. At the smallest instance of a hack, corrective action can be taken. So, the concern for security seems to be more an awareness issue. As the knowledge spreads we will see more discussions and awareness around this.

Standardization is still a different ball game. There are various consortiums - from Open source initiatives like R3 CEV and banks led consortiums. But as the use cases evolve there is expected to be some standardization moving forward. It may be also is a case of appropriate use cases.

So, When and How?

The rise of the Blockchains has been pretty fast. Beyond the financial institutions, we see private Blockchains being developed by the likes of Intel, Ethereum, IBM etc. As the standards evolve, we will see more implementations and use cases esp around IoT. So, the traditional IT services player need to be prepared for this and ensure they have the right skill and talents to be able to assist in this transformation and ensure new revenue streams from this disruption.

Frost & Sullivan is a global research and consulting organization that helps organizations to build powerful growth strategies with new business models, technologies and brand solutions.